WASHINGTON (Reuters) – The International Monetary Fund on Tuesday said Vietnam’s economic growth was expected to slow to 6.5% in full-year 2019 from a 10-year high of 7.1% in 2018, reflecting weak external conditions.

Vietnam’s gross domestic product was expected to expand by 6.5% again in 2020 and over the medium term, the IMF said in a report on the country’s economic developments. The fund also said inflation averaged 3.5% in 2018 and was expected to quicken to 3.6% in 2019 and 3.8% in 2020.

The IMF said trade tensions and volatility affected Vietnam in 2018, but the economy had remained resilient, fueled by healthy growth in middle class incomes and consumption, a strong harvest and a surging manufacturing sector.

“The strong economic momentum is expected to continue in 2019, aided by competitive labor costs and other strong fundamentals, including a diversified trade structure, and recently signed free trade agreements which are spurring reforms,” the IMF said in a statement.

“However, a soft landing of growth is expected, to 6.5 percent in 2019 and over the medium term, reflecting weak external conditions.”

The IMF’s executive directors welcomed Vietnam’s efforts to modernize its economic institutions and improve governance, and urged it to focus on strengthening anti-corruption legislation and improving oversight of state-owned enterprises.

It said the strong economy provided opportunities for more ambitious reforms to level the playing field for the domestic private sector and boost investment by reducing administrative and licensing procedures and trade barriers.

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